With former Xbox brass aboard, will Zynga try to hatch a low-cost console?

Zynga is in trouble. The maker of casual games like FarmVille and Mafia Wars tied itself tightly to Facebook, and as Facebook’s platform strategy floundered, Zynga took on water. It now appears to be about to go down for the count.

To right the ship, Mark Pincus will be replaced by Don Mattrick, who is currently running Microsoft’s Xbox business. Don must either be really well off or about to be canned at Microsoft, because the chances of Zynga pulling out of its dive at this point are slim or virtually non-existent.

Xbox One pre-orders are less than the PS4, which forced a late strategy change and likely would have put Mattrick on the short path to becoming an ex-Microsoft employee. Steve Ballmer, the guy running Microsoft, doesn’t have the greatest patience when it comes to executives who don’t perform or make big mistakes. Still, Xbox and Mattrick are a traditional console team, and this suggests Zynga could evolve into a console maker. The only thing is, I doubt it will work.

What’s the plan?

What I expect Mattrick will be doing – because I’ve seen this before – is execute a strategy he wanted to execute at Microsoft, likely one Steve Ballmer blocked. Often in companies like Microsoft, there are disagreements between the unit head and the head of the company. These days, Ballmer is increasingly stepping in and making sure what he wants done is done. Just because he is the most powerful guy in the company doesn’t mean he is right, and Mattrick’s strategy with the Xbox One to aggressively protect game developer revenues (which was reversed after gamers revolted) would have been very attractive to developers. You need developers for a new console. Microsoft is now left with gamers who are less excited about the new console because of what Microsoft was going to do, and developers who were excited, but lost some enthusiasm because of Microsoft’s backpedaling.

So Mattrick’s plan will likely be to build a console where developers are well protected, with Zynga being the lead game developer for the platform. It’s not that dissimilar to what Microsoft did with Bungie and Halo: Take (or in Microsoft’s case buy) a young game developer, build a platform that’s friendlier than the competition, and then bring the result to market. (Granted, Zynga would still need a game like Halo to pull this off.)

A sliver of hope

On the positive side, this console market is left a lot of openings for something new. The PS3 started off badly, and despite decent sales that finally brought it into an almost exact tie with the Xbox 360, Sony is still far behind in the U.S. Nintendo proved to be a flash in the pan and couldn’t sustain its success with the Wii, but it did provide an unprecedented opportunity for a new platform to emerge. We even have decent networking performance and technologies like Nvidia’s Grid platform, so Zynga could do hosted gaming and create a compelling console experience for under $100 (OnLive’s similar console sold for under $100).

The console market is relatively weak, and technologies exist that could allow a new company to enter it with a box that costs a fraction of what the Xbox One or PS4 will.

But there’s plenty more to deal with

To unseat Sony from its console throne, Microsoft spent billions, and it took two generations of hardware (and Sony’s screw-up with the PS3) to allow it to sneak ahead. Zynga doesn’t have that kind of cash. In addition, Nvidia is entering the market with its own console, Shield, in a few months, and Google has one coming to market as well. Both of these companies (but especially Google) can easily out-resource Zynga. Worse, Sony appears to be strengthening, and Microsoft still has a massive war chest to fight big battles like this. And Steve Ballmer won’t take kindly to an ex-executive trying to prove him wrong. In short, Zynga is overmatched by pretty much everyone.

Worse, Sony appears to be strengthening, and Microsoft still has a massive war chest to fight big battles like this.

Granted, if Zynga can follow the recent success of the Ouya and offer a console priced around $100, and create a Halo-like title, that might not matter. Gamers will chase quality games, but the likelihood of coming up with a title in this class, particularly on Zynga’s budget, aren’t good. And the company doesn’t have unlimited time to do it.

Wrapping Up: Pulling a Steve Jobs

Mattrick is going to try to emulate Steve Jobs’ Apple turnaround. Zynga is actually in better shape than Apple was when Steve took over that company, but Mattrick is also no Steve Jobs. You could count the number of Apple-style turnarounds we’ve seen on one hand … and have four fingers left over. This will be one of the most difficult turnarounds ever attempted. I seriously doubt Mattrick can pull this off alone, and his success may lay with whoever he partners with, or whether the company is acquired by a backer with the funding to assure success. In the end, there is clearly room for another compelling gaming solution; I just doubt Zynga has the resources to pull it off.